On July 31, 2018 Hologic, Inc. (Nasdaq: HOLX) reported the Company’s financial results for the fiscal third quarter ended June 30, 2018 (Press release, Hologic, JUL 31, 2018, View Source [SID1234528280]).
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"We posted good financial results in the third quarter, with both revenue and EPS exceeding our guidance," said Steve MacMillan, Hologic’s Chairman, President and Chief Executive Officer. "Our Breast Health and international businesses continued their strong recent performance. And Surgical and Cynosure both showed sequential improvement, in line with our expectations."
Recent Highlights
Global revenue growth was driven by the Breast Health and international businesses.
Breast health revenue of $307.9 million increased 8.5%, or 7.4% in constant currency, compared to the prior year period.
International revenue, excluding the acquired Cynosure business, increased 20.2%, or 14.5% in constant currency, to $163.8 million.
Completed today the acquisition of Faxitron Bioptics, a privately-held leader in digital specimen radiography, for approximately $85 million.
Announced that Chief Financial Officer Bob McMahon will depart to join Agilent; Chief Accounting Officer Karleen Oberton promoted to CFO.
Continued to advance research and development pipeline, launching several new products; ThinPrep Integrated Imager in the United States; Panther Fusion MRSA assay in Europe; Panther Fusion respiratory assays in Canada; and TempSure Vitalia in North America.
Repurchased 2.2 million shares of common stock for $80.8 million. The Company’s Board of Directors also approved a new $500 million share repurchase plan to replace the previous authorization.
Throughout this press release, all dollar figures are in millions, except EPS. Some totals may not foot due to rounding. Unless otherwise noted, all results are compared to the corresponding prior year period. Non-GAAP results exclude certain cash and non-cash items as discussed under "Use of Non-GAAP Financial Measures." Constant currency percentage changes show current period revenue results as if the foreign exchange rates were the same as those in the prior year period.
Other Financial Highlights
U.S. revenue of $616.8 million decreased (0.3%). Total international revenue of $207.2 million increased 10.5%, or 5.5% in constant currency.
Gross margin was 52.9% on a GAAP basis, and 62.6% on a non-GAAP basis. GAAP gross margin increased 210 basis points, while non-GAAP declined 50 basis points, primarily due to geographic and product sales mix.
GAAP net income of $112.9 million increased 89.7%. Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) was $261.7 million, an increase of 0.4%.
Total debt outstanding at the end of the quarter was $3.2 billion. The Company ended the quarter with cash and equivalents of $575.4 million, and a net leverage ratio (net debt over adjusted EBITDA) of 2.6 times.
On a trailing 12 months basis, adjusted Return on Invested Capital (ROIC) of 12.4% declined 20 basis points.
Financial Guidance for Fiscal 2018
Based on the Company’s strong performance in the fiscal third quarter, Hologic is increasing its full-year 2018 revenue guidance and raising its EPS guidance slightly at the midpoint.
Hologic’s financial guidance for the fourth quarter and full fiscal year 2018 is shown in the tables immediately below. The guidance is based on a full year non-GAAP tax rate of approximately 23%, and diluted shares outstanding of approximately 278 to 279 million for the full year. As a reminder, percentage changes versus the prior year are affected by the blood screening divestiture and the Cynosure acquisition, both of which closed in the second quarter of fiscal 2017. Constant currency guidance assumes that foreign exchange rates are the same in fiscal 2018 as in fiscal 2017. Current guidance assumes that recent foreign exchange rates persist for all of fiscal 2018.
Use of Non-GAAP Financial Measures
The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; non-GAAP gross profit; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP income from operations; non-GAAP operating margin; non-GAAP interest expense; non-GAAP pre-tax income; non-GAAP tax rate; non-GAAP net margin; non-GAAP net income; non-GAAP diluted EPS; adjusted EBITDA; and adjusted ROIC. Constant currency presentations show reported period revenue results as if the foreign exchange rates were the same as those in effect in the comparable prior year period. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization of intangible assets; (ii) impairment of goodwill and intangible assets; (iiI) additional depreciation expense from acquired fixed assets and accelerated depreciation related to business consolidation and closure of facilities; (iv) additional expense resulting from the purchase accounting adjustment to record inventory at fair value; (v) non-cash interest expense related to amortization of the debt discount from the equity conversion option of convertible notes; (vi) restructuring and divestiture charges, facility closure and consolidation charges and costs incurred to integrate acquisitions (including retention, transaction bonuses, legal and professional consulting services) and separate divested businesses from existing operations; (vii) transaction related expenses for divestitures and acquisitions; (viii) gain on disposal of business; (ix) debt extinguishment losses and related transaction costs; (x) the unrealized (gains) losses on the mark-to-market of forward foreign currency contracts for which the Company has not elected hedge accounting; (xi) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xii) other-than-temporary impairment losses on investments and realized (gains) losses resulting from the sale of investments; (xiii) the one-time discrete impact of tax reform primarily related to remeasuring net deferred tax liabilities and providing taxes for the deemed repatriation of foreign earnings (xiv) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company’s core business results as detailed in our reconciliations of such adjustments; and (xv) income taxes related to such adjustments. The Company defines adjusted EBITDA as its non-GAAP net income plus net interest expense, income taxes, and depreciation and amortization expense included in its non-GAAP net income.
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others.
The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of Hologic’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Hologic’s business.
Because non-GAAP financial measures exclude the effect of items that increase or decrease the company’s reported results of operations, management strongly encourages investors to review the company’s consolidated financial statements and publicly filed reports in their entirety. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.
Future Non-GAAP Adjustments
Future GAAP EPS may be affected by changes in ongoing assumptions and judgments, and may also be affected by non-recurring, unusual or unanticipated charges, expenses or gains, which are excluded in the calculation of the Company’s non-GAAP EPS guidance as described in this press release.
Conference Call and Webcast
Hologic’s management will host a conference call at 4:30 p.m. ET today to discuss its financial results for the third quarter of fiscal 2018. Approximately 10 minutes before the call, dial 888-224-1005 (in the U.S.) or +1 323-794-2551 (international) and enter access code 9960251. A replay will be available approximately two hours after the call ends through Friday, August 24, 2018. The replay numbers are 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 9960251. The Company will also provide a live webcast of the call at View Source